What is a 'Member'?

A member is a brokerage firm (or broker) that has been granted membership on an organized stock or commodities exchange. According to Encyclopedia Britannica, there are 1,366 seats on the New York Stock Exchange (NYSE) exchange, a limit that was set in 1953. 

BREAKING DOWN 'Member'

A broker-dealer or broker becomes a member of the NYSE or Nasdaq by filling out the appropriate forms and sending a check to the organization.

NYSE Membership

Any registered and new U.S.-based broker-dealer that is a member of a self-regulatory organization (SRO) and who has an established connection to a clearing firm may become a NYSE member. A broker-dealer must send the membership application, agreements and other appropriate forms to client relationship services, purchase a trading license and mail a signed copy of the applicant firm acknowledgment and the application fee to the NYSE. A broker becomes a member by filling out the appropriate NYSE form, such as a securities lending representative agreement, an equity trading license application or a one-day equity trading license application and mailing it with a check to the NYSE.

Nasdaq Member

A firm that is a FINRA, Philadelphia Stock Exchange (PHLX) or Bernie Exchange (BX) member becomes a Nasdaq member by completing the Nasdaq waive-in membership application and agreement along with the Nasdaq services agreement and submitting both with a check for $2,000. Proprietary trading firms that are members of another SRO submit a full Nasdaq membership application and agreement along with a supplemental information document, Nasdaq services agreement and written supervisory procedures checklist. All documents must be submitted with a check for $2,000 to the Nasdaq.

Advantages and Disadvantages of NYSE and Nasdaq Membership

Because of the increasing globalization of financial markets, both the Nasdaq and NYSE are establishing partnerships with other stock exchanges: the Nasdaq is partnered with the London Stock Exchange (LSE) and the Nasdaq OMX 100 Index; the NYSE is partnered with the Tokyo Stock Exchange and Euronext.

Since a Nasdaq member must meet lower minimum requirements to qualify for a listing, smaller companies are listed on a major exchange adding credibility to their products and services. The Nasdaq also has lower listing fees. For example, the Nasdaq listing fee for an initial public offering (IPO) is half that of the NYSE. In addition, the Nasdaq features all-electronic trading with faster execution, which is increasingly the norm on worldwide trading exchanges. The NYSE still uses specialists working on the floor buying and selling stocks.

However, traders consider Nasdaq members to be less established and less financially sound. Since the NYSE is 200 years older and considered more prestigious, companies such as Nortel and E*Trade have moved from the Nasdaq to the NYSE.

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